Committee hears wide-ranging testimony on bill to cap PEB/SEBB hospital payments and redirect savings to primary care

House Bill 1123, sponsored at the Appropriations Committee request of the Health Care Authority, would require licensed hospitals that participate in the state employee (PEB) and school employee (SEBB) benefit programs to contract with those systems on receipt of a good-faith offer and limit reimbursement for hospital services to specified multiples of Medicare rates beginning Jan. 1, 2027.

The bill sets initial upper limits at 200% of Medicare for most hospitals and 350% for children’s hospitals, stepping down to 190% and 300% respectively on Jan. 1, 2029. Rural critical-access and sole-community hospitals would be paid at a floor of 101% of allowable costs. Primary care and non–facility-based behavioral health services would have a reimbursement floor of 150% of Medicare; the bill also requires providers to supply cost and quality information to the Health Care Authority and forbids contractual restrictions on that reporting.

Supporters told the committee they expect HB 1123 to lower premiums…